Today we’ll look at yesterday’s retail sales report for November which came in significantly lower than October’s strong showing, and a new report that predicts worker wages will rise by the most in a decade next year, up nearly 4%.
Before we get to those discussions, let me briefly comment on the Fed’s latest policy decisions reached at this week’s meeting which wrapped up yesterday. There were no surprises, really. The Fed decided to quicken its reduction of monthly bond and mortgage purchases and bring such buying to an end by late winter or early spring next year. Again, no surprise there.
After the bond buying stops, the Fed expects to raise short-term interest rates 3 times next year. If so, the Fed Funds rate would rise from 0.00%-0.25% currently to 0.75%-1.00% by the end of next year. That’s exactly what the market was expecting. Stocks rallied late in the day.
As I reported in November, US retail sales jumped a stronger than expected 1.8% in October as consumers got off to an early start on their holiday shopping. The question I and others had, however, was whether this was a sign of a much stronger economy this year, or whether shoppers were buying early due to warnings about possible shortages of many goods due to supply chain disruptions?
Well, the retail sales report for November came out yesterday, and we now know the answer. Retail sales rose only 0.3% last month, whereas the pre-report consensus called for an increase of 0.8%. So it appears clear the big surge in October was merely pulling demand forward due to shoppers’ concerns that some popular items might not be available later on. And also in part due to concerns that prices might be higher later on as well due to the big jump in inflation this year (CPI up 6.8% in the last 12 months).
But we shouldn’t worry too much about the slowdown in November retail sales. Broadly, consumer demand remains strong and is well above last year’s levels. Retail sales rose 18.2% in November from a year earlier, showing low unemployment, rising wages and savings from stimulus payments are giving Americans the capacity to spend more this year.
Wednesday’s report showed sales at electronics stores down 4.6% in November from the previous month, while sales at general merchandise stores were down 1.2%. Spending at nonstore retailers, including online sellers, was flat last month.
Stores that sell sporting goods, musical instruments and books saw sales increase by 1.3% in November, the same as the increase at food and beverage stores. Sales at gas stations were up 1.7% last month and are up 52% from a year earlier, mostly reflecting significantly higher prices at the pump.
It remains to be seen what will happen with retail sales in 2022. With US consumer prices rising at the fastest rate in almost 40 years, accelerating inflation may give consumers additional pause in coming months.
Companies To Give Biggest Raises In a Decade In 2022
According to a new report out yesterday from the US Conference Board, Americans are in line for their biggest wage increase in more than a decade next year, as companies struggle against a tight labor market and high inflation.
Businesses are expected to bump up pay an average of 3.9% in 2022, according to the Conference Board report. That’s the fastest wage growth since 2008. Higher pay required to attract new hires was the most commonly cited reason for the expected uptick.
Labor shortages and high turnover rates across industries are giving employees more leverage with regard to pay. Also, with inflation higher than it has been in almost 40 years, workers are demanding higher wages. And higher pay is expected across the board, according to the report, for regular employees, hourly workers and executives.
The salary increases come at a time when new unemployment claims, a proxy for layoffs, are near historical lows, and millions of people are leaving jobs in search of greener pastures. An estimated 4.2 million Americans quit their jobs in October, the Bureau of Labor Statistics reported last week.
Those in non-union jobs have seen their wages climb at a much faster rate, according to Bureau of Labor Statistics data. Unionized workers can be subject to drawn-out negotiations between their unions and employers, which means raises can take longer to finalize. Compensation analysts say that could be part of a broader nexus of events driving workers in a range of industries to leave their jobs or go on strike.
Yet even a 3.9% pay raise still won’t cover the effects of inflation for most employees. The cost of goods and services jumped 6.8% over the past year, according to the latest CPI report from US Bureau of Labor Statistics. And experts, including Treasury Secretary Janet Yellen, expect inflation to continue at high levels into late next year. I’ll have more to say on rising inflation in Forecasts & Trends on Tuesday.
The Christmas holiday is racing toward us, and I wish you all GOOD CHEER!
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